At his first annual meeting as boss of Loblaw Cos. Ltd., Galen G. Weston stood on a makeshift stage at the historic Maple Leaf Gardens, acknowledging the grocer’s troubles and pledging to “make Loblaw the best again.”
Four and a half years later, much of Loblaw’s turnaround is still riding on his promise. Today Mr. Weston will again stride through Maple Leaf Gardens to launch the retail chain’s flagship store at the former home of the Toronto Maple Leafs hockey team. The heir to the wealthy Weston family, whose father built Loblaw in its heyday of the 1980s into an international food retailing icon, is counting on the landmark location to serve as a symbolic backdrop to re-establishing the grocer as a foodie’s haven.
But if Loblaw fails to carry out many of the improvements at the Maple Leaf Gardens store at its other outlets, Mr. Weston risks again disappointing his customers when they look for the changes at their local Loblaw store. In that case, the grocer stands to lose shoppers to the rising competition.
“The store is meant to symbolize Loblaw’s revitalization and return to its roots as a premium brand,” said Mark Satov, a retail strategist at Satov Consultants. “ If they execute well, then they’ll get that frequency” of drawing customers back to their neighbourhood Loblaw stores across Canada. “If they don’t execute well, then they won’t.”
Mr. Weston has come a long way from the days in 2006 when he stepped into the top job amid logistics snags that often left his store shelves empty. The dysfunctional systems hit the grocer’s bottom line, turning it into the red for the first time in almost two decades that year, while its stock price plunged.
Under new leadership and a new plan – focused on a return to its food roots after a distracting non-food expansion – Loblaw is slowly showing signs of improvement, although it’s taking longer than Mr. Weston had first predicted. Now he’s taking the next step with the Maple Leaf Gardens store to prove that Loblaw can outshine its competitors.
On paper, the store looks encouraging. Shoppers breathe in the aromas of George Weston-owned Ace Bakery artisan breads being baked in an oven and freshly cooked ready-to-eat fare at an elevated open kitchen. They’re confronted by a wall of cheeses, chocolate “chiselled by the chunk,” an expanded tea emporium, and an “East meets West” sushi bar featuring chef-inspired creations from Loblaw-owned ethnic specialist T&T Supermarket.
Mr. Weston’s team so far has generated an improved bottom line with the help of cost-cutting, better distribution systems and a stronger loonie to purchase products in U.S. dollars. In its third quarter, Loblaw profit jumped almost 20 per cent to $236-million while revenue at the country’s largest grocer rose 2 per cent to $9.7-billion, thanks in part to rising gasoline and food prices.
Critics still are waiting for a full turnaround. Perry Caicco, retail analyst at CIBC World Markets, said last week that Loblaw has spent the past few years ceding market share and brand image to “a wide variety of other more relevant food retailers … If the Canadian dollar hadn’t moved strongly in their favour the past two years, we doubt there would have been any earnings growth at all.”
The arrival of a new president at Loblaw, Vicente Trius, a veteran of archrival discounter Wal-Mart Stores Inc., has raised optimism among company watchers. Mr. Caicco still has his doubts. “The new president seems like a competent, experienced executive, but he has not been given the CEO title and seems to have limited influence over anything other than store operations and merchandising.”
Today, all eyes are on the grocer’s Maple Leaf Gardens store. It is aimed at serving as a flagship for the Loblaw brand, much like Nike and Gucci, which have stores that showcase its products and create a buzz for the name, Mr. Satov said. The store also will serve to reintroduce the grocer to downtown office workers and send them back to try their local Loblaw. To cash in, Loblaw will need to show customers that its other outlets boast similar enhancements, he said.
Loblaw can use the Maple Leaf Gardens location as a testing ground for new ideas, said George Condon, a consultant and former editor of industry publication Canadian Grocer. Last year, the retailer relaunched offices in Hamilton for its Fortinos arm and industry sources say it has used the site for a project to develop fresh takeout foods, which will benefit the new downtown Toronto store.
The store is Loblaw’s belated return to urban centres under its mainstream banner, after rivals Sobeys and Metro have rushed to cater to a growing condo market as well as nearby office workers.
“Loblaw’s food offerings have not kept pace with other retailers,” Mr. Condon said. “They realize that and they’re trying to do something about it.”
Editor's note: An earlier online version of this story and the original newspaper version of this story incorrectly stated that Ace Bakery is owned by Loblaw Cos., which is itself majority-owned by George Weston Ltd. This online version has been corrected.